Rajasthan reforms labour laws, will other states follow?

The new Bharatiya Janata Party government in Rajasthan was first off the reform block. Its move to liberalise the state’s labour laws is targeted at attracting more investments by projecting an employer-friendly image. Of course, labour is just one of the factors for investing in a state, along with others such as ease of doing business and getting approvals, transparent policies and infrastructure.

But Rajasthan has shown courage by taking on the politically sensitive topic of labour reforms. A bottom-up approach to labour reform appears more practical instead of the centre deciding on a one size fits all approach. That may lead to labour unrest all over the country, especially in states where labour unions have very strong political backing.

If Rajasthan can show that its actions resulted in creating more net jobs, then workers may be willing to live with less job security. Higher demand for workers is enough to provide security (and higher wages). The state should also be strict in ensuring workers get their statutory entitlements, so that there is no sense of injustice.

If these changes help Rajasthan attract more investments, then other states will feel the pressure to follow suit. That may see labour laws change across the country in several states.

The Rajasthan cabinet has approved changes to three labour laws, according to this news report on www.indianexpress.com titled

One of the key demands from industry has been the right to retrench, if business conditions demand it. The state government has proposed an amendment to the Industrial Disputes Act, in which a company can retrench up to 300 employees without seeking permission, up from the present level of 100 employees. A 3-year time limit has been fixed for raising of disputes and the percentage of workers required for registration as a union will be increased from 15% to 30%.

In The Contract Labour Act, the state government is proposing to raise the limit for applicability from companies employing more than 20 workers to more than 50 workers. The Factories Act too is being liberalised, with the applicability threshold being doubled to 20 workers for units with power and 40 workers for units without power. These two amendments will primarily benefit the small scale sector and reduce inspection-related headaches.

The Centre is likely to approve these amendments, since the BJP is in power. Rajasthan has lagged in investments and it must be hoping that such measures help in attracting more industries to the state. In 2013, data from the DIPP website shows that Rajasthan got only 7% of the total investment proposals, but this is better than 3.2% in the previous year and has shown a steady improvement since 2009. The Vasundhara Raje government seems keen to take this share up even higher.

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